A judge says Queenstown developer Chris James’ family trust “fraudulently” tried to conceal $740,000 from his failed company’s creditor.
Auckland High Court judge Rachel Dunningham: “It was a deliberate, if unsophisticated, device to remove the [$740,000 from failed James Developments’] balance sheet to avoid relinquishing it to [the] main creditor upon liquidation.
“There can be little doubt the removal of the $740,000 liability from the accounts of the trust was dishonest.
“I am satisfied Mr James knew the [trust] resolution was incorrect but intended to prevent this sum being available to [company] creditors,” the judge ruled.
The $740,000 was advanced by James’ company to his trust in 2006 - to go towards buying an exclusive $2.6 million Jack’s Point home site where James has since built a three-bedroom, five-bathroom family mansion.
However in 2008, James Developments (JDL) began being chased for failing to settle on a Cromwell commercial site.
Mana Property Trustee successfully sued JDL for $4m-plus and while this verdict was being appealed, James liquidated his company.
Shortly before the July 2009 liquidation, Justice Dunningham says in her recent judgment, “The trust’s accounts were also amended so that the $740,000 became part of the debt owed to Mr James and the liability to JDL was removed.
“The defendants now admit the sum of $740,000 was owed to JDL [by the trust] and the recoding of it from an advance to a repayment was incorrect.
“Although Mr James claims he was simply acting on [professional] advice, I am satisfied that at the time he signed the [trust] resolution he knew there was no factual basis for the recoding.
“Furthermore, his accountants had told him that if put to the test, it would not stand up on a legal or accounting basis,” JusticeDunningham rules.
The judge compliments Auckland liquidator Grant Reynolds - appointed by main creditor Mana - for his thoroughness and persistence in verifying the accounts.
The James trust has been ordered to repay the $740,000 to the failed JDL, together with interest from June 2012.
Liquidator Reynolds’ lawyer filed several other pleadings but Justice Dunningham declined them on points of law.
Mountain Scene tried to establish whether the James trust may appeal but the developer didn’t return calls.